Are You a Physical or Digital Business?
I recently learned that physical businesses make up 75% of private sector employment, produce 70% of the output and yet represent only 30% of IT investments.
Physical businesses are represented by manufacturing, mining, health care, education, automotive, transportation, retail and other business models that make stuff, deliver stuff, extract stuff, and provide traditional services such as hair salons, hotels and construction.
Digital businesses are known to be technology, software, finance, communications, media and other business models that can be digitized, leverage automation, apply artificial intelligence, robots, software, you know, the “zeros and ones” industries.
Did you know that physical industry productivity grew a paltry 0.7% over the past 15 years compared to digital industries that grew at a robust 2.7%. That’s 117% higher level of productivity. Can you imagine if your organization had that level of productivity improvement?
So what? If I’m a digital business, great; life is good. If I’m part of a physical industry, I have burdensome regulations, less to invest in R&D, legacy systems, fixed assets, and a product or service that doesn’t lend itself to digitalization or the other characteristics of a digital business.
That’s what the “taxi industry” said, what traditional retailers used to say and what the mining industry said until they embraced digitized mining and 3D modeling that turned the US into a top energy producer thanks to the use of new fracking technology.
If you’re a digital business, how can you profit by helping the physical businesses that are stuck, out of ideas or calcified in their thinking?
If you’re a business that has traditionally been a physical business, such as banks, trucking, restaurants, car dealers, health care, or hotels, how do you embrace, fund and get on with improving the performance, productivity and job retraining necessary to reap the outputs, economic gains and competitive advantage of the digital economy?
If you lead a trade association, you are in a unique position to help your industry think and act its way to a new future.
1. Unpack your industry into its common-denominator elements, and map where innovation has occurred, where it is stuck and where the greatest gains would occur with a new way of thinking.
2. Convene a cross section of industry leaders, experts, outsiders and regulators, and apply new thinking to the old problems—it takes a village, and trade groups can convene the right people.
3. Initiate and fund an innovation lab that brings the best thinking, applied solutions and a new source of ideas, products, services and acceleration to your industry.
Most industries change when they feel the heat, not when they see the light. Trade associations are uniquely positioned to shine the light and help turn down the heat. Many are, and many more need to.